My younger brother Ron and I were very big for our age. When people told Pop, "You have really good looking boys," Pop would smile and agree: "Yep, they're strong as an ox and nearly as smart."

Sunday, March 04, 2007

Liberals Don't Understand The National Debt Either

I have exchanged posts on the Contra Costa Times Forum with several Liberals, and one of them, Medawhite, is in truth a flaming Leftist. Much of what Medawhite writes seems to be derived from such bastions of socialism, and more precisely communism, such as International Answer.

I have taken excerpts of Medawhite's post (highlighted in maroon below), then followed with my comments.I will not argue on the level of GDP spent on the military between then and now since the economy today has no relation to the economy of 1950 which did not have an interstate highway system or air transport system that in any way could be considered commercially and militarily viable. Therefore your argument at best is deceptive and at worst pure dung heaped on what might otherwise be an intelligent debate.

What the interstate highway system or air transport system has to do with anything is beyond me. We had an excellent railroad system, and a huge number of cargo ships. The point was and still is that we are spending a much smaller percentage of gross domestic product on the military now than we used to. It’s not my argument. Armies of academics, economists, and statisticians have compiled, analyzed, and reported these statistics for over sixty years.

That seems to be news to you, so I doubt you have any college-level economics, history, or statistics on your transcript – at least not with a passing grade.

I see you don’t like graphs. You consider them boring. Probably because you don’t have a clue about how to read them, or what they mean.

On your farm subsidy argument: If agribusiness is so efficient and productive then why is agribusiness subsidized in the first place?

In 1929, before agriculture subsidization, Americans spent 23.9% of their income on food, by 1997 this had lowered to only 10.7%.

Agricultural subsidies were started by Franklin Delano Roosevelt, a Democrat, as part of his program of relief to farmers during the Great Depression. Republicans have been trying to get rid of it ever since. However, it has worked to stabilize prices and agricultural production. Today we have more food, more variety, and lower prices for food of any nation at any time in all history.

Even our poor are fat.

If we were discussing oil subsidies that would be a different matter since the US taxpayers pay billions to the oil industry to keep a gallon of gas lower at the pump here than the world market prices elsewhere.

How wrong you are. The billions Americans pay to the oil industry are for oil, not subsidies. The higher prices elsewhere, forinstance in Europe, are due to the high taxes European nations place on oil, and have nothing to do with world market prices.

As an example, when I was the base budget officer in England 1970-1975, the United States Air Force and the British bought gasoline from the same supplier. We didn’t pay any taxes on gasoline when we bought it on our Air Force base, so we paid about twenty cents a gallon and the Base Exchange made a profit on that. Off the base, the same gasoline was sold for about seventy-five cents a gallon, almost four times as much. The difference was taxes, not market prices.

Fuel taxes account for more than half of every Euro spent at the gas pump. Gasoline recently hit €1.36 a liter, the equivalent of $6.40 a gallon.

Bild (a German publication) warns that new taxes being proposed (higher sales tax, a health care tax and a surtax on rich people) could strangle Germany's economic rebound. However, both high taxes and very high gasoline taxes are necessary to raise money to pay down huge public debts. In Europe gasoline taxes are paid into the general fund, whereas in the United States they are treated as user fees and go into a fund for transportation-related projects.

I find that Europe is not in anyway heading for disaster; quite to the contrary of your contention on the matter the world is slowly trying to convert to euros because they see the impending disaster that is inevitable; that the dollar will be devalued to the point of no longer being the currency of world exchange.

You really need to crack open a book on basic economics. Taxes in Europe are very high, and going higher because the ratio of older retirees to younger workers is very high and rising rapidly. One reason among many is that the European birthrate is very low, is falling, and has already fallen below the replacement rate of 2.1 births per woman in most countries.

European birthrates are the lowest in the world - and the lowest sustained rates in history: 1.2 per woman in the Czech Republic, Slovenia, Latvia and Poland, far below the rate of 2.1 needed to maintain population.

West European countries are also suffering: Greece, Italy, and Spain have had rates of 1.3 and under for a decade

Birthrates have reached a historic and prolonged low in European countries, from Italy and Germany to Poland and the Czech Republic, straining pension plans and depleting the work force across the Continent.

The number of elderly already exceeds the number of young people in many countries, and the European Union's executive arm, alarmed by the trend, estimates that the bloc will have a shortfall of 20 million workers by 2030 if the low birthrates persist.

Will the last Europeans please send any Euros they have left – not many after taxes, to be sure – to some other needy socialist country? Any socialist country will do, because they are all on their way to economic ruin because of their high taxes and expensive welfare societies.

Social Security comes to mind when speaking of entitlements so I will use it for my talking point. First of all even the word entitlement is a misnomer since the operating funds come directly from payroll deductions and is paid for by the recipient.

Wrong again! Social Security payments are transfer payments which are paid from funds collected from current workers to the recipients. The recipients did not pay for the Social Security payments they are receiving now. All those funds they paid in when they were working were immediately paid out to former recipients, and any excess was spent by the government to cover shortfalls in the general fund. Social Security is a “pay-as-you-go” program, not a pension plan.

It’s also a very unfair program. Historically, the class of person drawing the most from Social Security often paid in the least, i.e., the relatively long-lived elderly white women whose life expectancy is almost eighty years, many of whom were stay-at-home mothers and now draw social security as a widow. The lowest life expectancy is a black male, who is often single, and on average dies at about the time he becomes eligible to receive full Social Security benefits. Since Social Security is not vested, when he dies all his potential future benefits disappear.

They wouldn’t if Social Security was privatized, but Democrats can’t stand the thought of losing all that money to spend on their pet programs now.

The only one that is receiving the entitlement is the US government that raids the Social Security fund as though it were a slush fund to finance the military with all the glee of someone that has found free money.

A Democrat, Lyndon Baines Johnson, and a Democrat congress are the ones you can thank for that. It’s Republicans who are trying to privatize Social Security, and get the government’s filthy hands off it.

By the way, since that raid on Social Security was started by the Democrats in the late 1960’s, expenditures for the military have decreased relative to expenditures for social programs. The Democrats used it as a slush fund, but not to finance the military, but to pay for rapidly increasing costs of Social Security, Medicare, and Medicaid as the share spent on the military shrank rapidly.

Remember this graph I included in the post you are commenting on now?

Oh, that’s right, you don’t do graphs.

Graphs may have a place in some instances, but in a debate they are really boring and frankly useless as a learning tool.This chart shows that as Defense Spending has shrunk in terms of percentage of GDP, social spending has increased rapidly.

Federal Outlays, 1962 to 2001(As a percentage of GDP)

Source: Congressional Budget Office.

If entitlements are absorbing all of the money; why was the US budget in the black when Clinton left office and is now seven trillion in the red with everlasting war spending by the Pentagon and the corporate raid on the US Treasury of 1.2 trillion dollars handed to them by Congress in 2002?

The current year budgets were in the black during the last years of the Clinton presidency, but the National Debt was 6 trillion dollars when he left office. You are mistaking the current budget deficit or surplus with the National Debt.

The budget under Bill Clinton went into surplus because of two main reasons. 1) Clinton cut military expenditures because of the perceived “peace dividend” resulting from the collapse of the Soviet Union, and 2) the strong economy provided ample tax revenues up until the Clinton Recession, which started in October 2000 following the dot.com collapse and huge stock market losses in the middle of 2000.

The current high tax revenues resulting from strong economic growth resulting from the Bush tax cuts which brought us quickly out of the Clinton Recession have brought the current budget deficit down to a projection of less than 200 billion dollars (Even with coming out of recession, recovering from the stock market crash, 9/11, Katrina, and the Iraq War).

However, the fly in the ointment is that the National Debt does not reflect the huge costs that will hit soon and rise sharply as Baby Boomers reach Social Security and Medicare age. The first Baby Boomer reaches reduced Social Security eligibility (62) in two years, and Medicare eligibility (65) in five years.

Both Social Security and Medicare will be bankrupt in less than a decade after that.

One reason things are in such a mess is because we have citizens like you, who don’t know the difference between a current budget year deficit or surplus and the National Debt.